Tiny
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Post by Tiny on Sept 13, 2019 12:31:36 GMT -5
www.msn.com/en-us/money/personalfinance/this-budget-shows-how-a-dollar350000-salary-barely-qualifies-as-middle-class/ar-AAH9hcZThe article has a budget for a 2 parent 2 young kid family with an income of 350,000. I can totally see where it might be difficult to make ends meet with high fixed expenses for 2 kids one in daycare one in a school with tuition and a 6K Mortgage payment (PITI). I guess I'm MORE shocked that they have such crappy employee benefits for such high salaries. There's no pretax benefits for healthcare. And no Flex Spending or Dependent Daycare or HSA pre tax benefit. Nor is there a pretax benefit for their commute expenses. All they are getting is their 38,000 401K pretax contribution. The budget also doesn't seem to include all the other payroll taxes (state, SS, etc...) Maybe I'm not reading it right. So my question/issue is: What kinds of Tax saving options DO high income earners have beyond a 401K contribution ?
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haapai
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Post by haapai on Sept 13, 2019 12:55:00 GMT -5
I'm getting a "Whoops! We're fixing something" message when I click on that link.
Call me cynical, but I don't expect that link to ever lead to anything except further error and unavailable messages.
I do not like how digital news walks away from stuff. That might be the case here.
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Tiny
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Post by Tiny on Sept 13, 2019 13:24:21 GMT -5
I think I fixed the link.
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flamingo
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Post by flamingo on Sept 13, 2019 13:40:01 GMT -5
I'm having a hard time with $350,000 being called middle class. Having a lot of expenses, and a lot of pricey expenses that you choose to have (fancy daycare, private school, etc), doesn't change the fact that earning $350,000 is an upper class salary.
I'm not saying that raising on a family on that income is always easy. I'm just saying that they aren't middle class.
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Post by The Walk of the Penguin Mich on Sept 13, 2019 13:53:27 GMT -5
www.msn.com/en-us/money/personalfinance/this-budget-shows-how-a-dollar350000-salary-barely-qualifies-as-middle-class/ar-AAH9hcZThe article has a budget for a 2 parent 2 young kid family with an income of 350,000. I can totally see where it might be difficult to make ends meet with high fixed expenses for 2 kids one in daycare one in a school with tuition and a 6K Mortgage payment (PITI). I guess I'm MORE shocked that they have such crappy employee benefits for such high salaries. There's no pretax benefits for healthcare. And no Flex Spending or Dependent Daycare or HSA pre tax benefit. Nor is there a pretax benefit for their commute expenses. All they are getting is their 38,000 401K pretax contribution. The budget also doesn't seem to include all the other payroll taxes (state, SS, etc...) Maybe I'm not reading it right. So my question/issue is: What kinds of Tax saving options DO high income earners have beyond a 401K contribution? Not a lot. Deferred compensation is one, but that winds up causing issues too. Lots of things get phased out at higher salaries. I was also also surprised at the cost of their healthcare. I have to wonder if they are independent contractors. You have 401k and healthcare options, but many times they suck. $70/day for food seems really high too, especially with 2 young kids.
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movingforward
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Post by movingforward on Sept 13, 2019 13:59:08 GMT -5
So I wonder where did the $50K come from to pay off the student loans...Obviously, they had to cut something in the budget while those were being paid off... ETA: Maybe they were paid off before they had kids, I guess
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movingforward
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Post by movingforward on Sept 13, 2019 14:03:59 GMT -5
Isn't this what most middle income people do in order to save for retirement? I consider $350K per year to be upper upper middle class. The bottom line is that middle class people don't get to have everything. You can have some of what you want but you don't get to have it all. There are very few people that don't have to make choices in this world when it comes to money. I find the people in this article to be irritating...
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raeoflyte
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Post by raeoflyte on Sept 13, 2019 14:29:35 GMT -5
Isn't this what most middle income people do in order to save for retirement? I consider $350K per year to be upper upper middle class. The bottom line is that middle class people don't get to have everything. You can have some of what you want but you don't get to have it all. There are very few people that don't have to make choices in this world when it comes to money. I find the people in this article to be irritating...
This was my thought as well. I'm sure they thought they'd be swimming in money, but it still comes down to choices.
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teen persuasion
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Post by teen persuasion on Sept 13, 2019 15:03:01 GMT -5
Two destination vacations per year, one staycation, weekend getaways, weekly date nights, shows, sporting events...
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Tiny
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Post by Tiny on Sept 13, 2019 15:06:09 GMT -5
OK, I see the health care line and the other payroll taxes line in the budget. If their employer benefits have dependent daycare or an FSA - they may be leaving some money on the table. (DDC is 5K per year - and I would imagine they have atleast 1K in expenses an FSA could be used for...)
Holy CRAP! $70 a day for food! ::swoon:: whoa. I'd suffer the awfulness of not pooping out or throwing out rotted food from the fridge/cabinets and cut back that budget atleast $20 per day of food. I'd have an additional 7K per year. Heck, I'd give up $10 of food from that budget and pocket $3650.00.
How much in CC rewards are they getting? I had 5% cash back on gas for 6 months (2 different quarters on 2 cards) and then 5% on grocery (same 2 cards), there's also been 5% cash back on Restaurants for the last 3 quarters (I've got 3 rewards cards with rotating categories). I think the "max" rewards in any quarter is $150 per category per card.... hmmm...
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hoops902
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Post by hoops902 on Sept 13, 2019 15:46:02 GMT -5
I look at their expenses and I don't know that anything says "wow you're crazy high here". On a % basis, it seems...ok. The problem is...if you make a lot of money, and you want to NOT live paycheck to paycheck, you can't spend the same %'s that someone who makes very little money and lives paycheck to paycheck does. That's SUPPOSED to be the beauty of making good money. You go from bringing home $100k/year to $200k/year...you don't just double all your expenses.
So I look and think "Ok, you make about 3x what I make"...some things SEEM super high like childcare, but they're paying less than 3x what I pay for it, so that's a net win I suppose. But your house is 5x what mine is. Your health care is a lot more that mine is (which is "whatever", as employer subsidization impacts payment anyways, so it's not necessarily comparable). Vacations and entertainment are 10x what I spend. Food is 4x what I spend.
The good news is that some of those things CAN be temporary. I'm dropping $20k/year on daycare...but my kids will be going to a public school so I get that money largely back once they're in school (obviously they'll have some expenses, but nothing near $20k). They could get $53k/year back when their kids go to school if they wanted.
I get it, places like San Francisco aren't cheap. Living somewhere like San Francisco doesn't necessitate spending $15k/year on vacations and entertainment though. It doesn't necessitate spending that much on food. They're living a 1.8 million dollar home apparently. They're also saving 20% of their take-home pay, which I'm sure is higher than the national average.
It's also worth pointing out, if you "budget" to the point that you have "saving" for any money that's left over...you'll always net out to almost $0 at the end, you've simply taken all your excess money and allocated it to savings. If I made my budget like that, at ANY point in my life, it would always net out to about $0. It makes a big difference if you just bury all your savings in line items as you go vs pointing out how much you're saving at the end when it comes to most people analyzing it. If your "money left over for misc" is high, you're probably doing it wrong. You don't just want to sit around with a bunch of cash at the end, save/invest it!
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laterbloomer
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Post by laterbloomer on Sept 13, 2019 23:31:48 GMT -5
Ditto hoops902 They have a $1.8 million home. (I'm surprised that only costs them $3900/month) and $53,000 in childcare. Both of those could be downsized. Or at least the daycare could be temporary, but I get the impression these folks will send their kids to private school. They could go down to half for the housing. Right there is about $75,000/year in savings. That's significant on a take home of $225,000, add that to the $50,000/year they are already saving and you're doing pretty good.
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jkapp
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Post by jkapp on Sept 14, 2019 10:06:04 GMT -5
I was reading this article yesterday and found several areas where they could have much more money to work with: The 529 Plan...yes its nice that they want to put a $1000 a month into it, but if they are so scrapped for cash then they should trim this down some and then ramp it back up later. They could drop it to $750 a month and that would triple their current "excess" cash. Baby items...this one is suspicious because they list stuff like cribs and play pens. This is not a monthly expense, it (should be) a one-time expense. And diapers and toys can be expensive but I doubt its $350 a month. Anyway, this expense is only temporary with a 2 yr old and 4 yr old.
Vacations...maybe take two staycations and one destination vacation. I always say its stupid to say how little money you have to save when you are blowing $7800 a year on vacations.
Entertainment...again, with the "weekend getaway" crap. They are paying $70k a year for their house, how about spending some time in it? They could easily drop this number down to save a crap-ton of money. Clothes...$400 a month for clothes and they say it is Old Navy not high end stuff. You could buy half the stuff in Old Navy for $400! There is definitely some savings to be had here. Personal care products...a $100 a month for what? This isn't a huge budget breaker for them but this just seems really high. Charity...its nice that they want to give so much to charity, but if they are complaining about having only $1500 cushion in their budget, then maybe they can't afford the $3600 they are giving every year. Maybe hold off a year or two until your financial situation is better. Just with those items listed above they could easily save $1000 a month, probably more. They have plenty of money, they are just financially illiterate. Plus, this is a snap shot of thier budget...if they got a 2% raise the following year, that would give them an extra $7000 gross (estimate $3-4k net) added into their budget right there. But the way they do things, they would probably just add that to their vacation budget. This example just shows how stupid people are with money, not that they don't have enough of it.
And what was the point at the end of the article about the FIRE movement and how this couple couldn't qualify? Of course they couldn't - they aren't living a FIRE lifestyle!
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Deleted
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Post by Deleted on Sept 14, 2019 10:14:13 GMT -5
Why on earth would they take the standard deduction?
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Deleted
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Post by Deleted on Sept 14, 2019 11:03:34 GMT -5
They didn't claim the dependent care credit either. Look at that. I've found them at least 4K/year without even cutting from any of their ultra fluffy categories...like $350/month for baby supplies.
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saveinla
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Post by saveinla on Sept 14, 2019 11:11:49 GMT -5
They didn't claim the dependent care credit either. Look at that. I've found them at least 4K/year without even cutting from any of their ultra fluffy categories...like $350/month for baby supplies. Agree. I don't see why they have to buy a crib every month
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Deleted
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Post by Deleted on Sept 14, 2019 11:17:46 GMT -5
They didn't claim the dependent care credit either. Look at that. I've found them at least 4K/year without even cutting from any of their ultra fluffy categories...like $350/month for baby supplies. Agree. I don't see why they have to buy a crib every month Especially for a 2 and 4 year old. I really hate these high income "we can barely make it" budgets. They just piss me off more than anything.
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Tiny
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Post by Tiny on Sept 14, 2019 16:15:04 GMT -5
It's also worth pointing out, if you "budget" to the point that you have "saving" for any money that's left over...you'll always net out to almost $0 at the end, you've simply taken all your excess money and allocated it to savings. If I made my budget like that, at ANY point in my life, it would always net out to about $0. It makes a big difference if you just bury all your savings in line items as you go vs pointing out how much you're saving at the end when it comes to most people analyzing it. If your "money left over for misc" is high, you're probably doing it wrong. You don't just want to sit around with a bunch of cash at the end, save/invest it! I agree with Hoops' whole post. I realize that some of their spending goes with the big income/HCOLA. I guess I was just kind of surprised that they don't seem to be 'working the system" to their advantage. Their budget feels alot like what Hoops points out above "we'll save whatever money is left over" and of course there is no money left over. I guess I'm kind of disappointed that they aren't making the most of all that money they are earning. With a note that people earning way less also don't make the most of what they earn either. My take away from it is - it doesn't matter how much income you have - it takes work and knowledge to "make the most of it" otherwise it just get's frittered (or in the couple's case - pooped) away. yeah, I'm still kind of stunned by their amount of money they are paying to eat....
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Post by The Walk of the Penguin Mich on Sept 14, 2019 17:00:50 GMT -5
They didn't claim the dependent care credit either. Look at that. I've found them at least 4K/year without even cutting from any of their ultra fluffy categories...like $350/month for baby supplies. As I mentioned above, my best guess is that both are contractors. TD contracted for awhile, and made an obscene salary, but the 401k and health insurance plans he had access to were crap. Not only that, FSA accounts were not available. I think dependent care credit phases out at certain incomes.
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Deleted
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Post by Deleted on Sept 14, 2019 17:24:53 GMT -5
They didn't claim the dependent care credit either. Look at that. I've found them at least 4K/year without even cutting from any of their ultra fluffy categories...like $350/month for baby supplies. As I mentioned above, my best guess is that both are contractors. TD contracted for awhile, and made an obscene salary, but the 401k and health insurance plans he had access to were crap. Not only that, FSA accounts were not available. I think dependent care credit phases out at certain incomes.No. The percentage you get goes down based on income, but the lowest tier is 20% and that's for any income. I wasn't talking about health insurance or housing costs when talking about fluff. I was referring to the $2100/month for food, $650 month for travel, $400/month for clothes, $350 month for baby stuff fluff... They have two 401Ks maxed in their budget, but they should still be able to itemize well beyond the 24K standard deduction. They have almost 24K in mortgage interest alone. Then they can take the full 10K SALT limit and the $3600 in charitable contributions.
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alabamagal
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Post by alabamagal on Sept 14, 2019 18:23:11 GMT -5
I just jealous that there home insurance is less than mine, and my house is only $250k
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hoops902
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Post by hoops902 on Sept 15, 2019 17:56:14 GMT -5
It's also worth pointing out, if you "budget" to the point that you have "saving" for any money that's left over...you'll always net out to almost $0 at the end, you've simply taken all your excess money and allocated it to savings. If I made my budget like that, at ANY point in my life, it would always net out to about $0. It makes a big difference if you just bury all your savings in line items as you go vs pointing out how much you're saving at the end when it comes to most people analyzing it. If your "money left over for misc" is high, you're probably doing it wrong. You don't just want to sit around with a bunch of cash at the end, save/invest it! I agree with Hoops' whole post. I realize that some of their spending goes with the big income/HCOLA. I guess I was just kind of surprised that they don't seem to be 'working the system" to their advantage. Their budget feels alot like what Hoops points out above "we'll save whatever money is left over" and of course there is no money left over. I guess I'm kind of disappointed that they aren't making the most of all that money they are earning. With a note that people earning way less also don't make the most of what they earn either. My take away from it is - it doesn't matter how much income you have - it takes work and knowledge to "make the most of it" otherwise it just get's frittered (or in the couple's case - pooped) away. yeah, I'm still kind of stunned by their amount of money they are paying to eat.... Just to clarify, my point was really that if they just saved what was left after actual expenses...they would have ended their budget with "oh look, we save $50k/year". But by making the savings a line-item, and not putting it at the bottom...it makes it look like "oh we're barely getting by, look we have $0 left over at the end of the month for miscellaneous expenses". But that's what it SHOULD look like...if they have line items for savings, and at the end of the month the year they said "look, we have $30k left over"...that's a HUGE MISTAKE...they should be doing something with that $30k, like investing it. Instead, they're treating all the money they're saving like an expense, and mixing it into their line items, to APPEAR they have no money left over...when the reality is they have tens of thousands of dollars left over every year, and plenty more fat in their budget they COULD cut. I would expect EVERY decent budget to look like this...you should never have money left over at the end of your budget year if you can help it, you should be doing something with it like investing it, just like they are. I would expect someone making a million dollars a year, and spending 25% of it to have the same amount left over and unbudgeted at the end of the year. Just a bigger amount in savings..but as it stands they're still saving 20% of their take-home while living comfortable. I'm not sure saving 20% of takehome qualifies as "barely getting by" as they're trying to portray.
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HoneyBBQ
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Post by HoneyBBQ on Sept 16, 2019 11:50:37 GMT -5
OK, as a higher earning household in one of the listed HCOLA I will chime in here.
No, they don't have butler, a boat, or a cook. But they have a LOT of things that the middle and lower class struggles with having: maximizing their retirement accounts, regular childcare, vacations, health insurance, umbrella insurance, life insurance, $500/month for entertainment, a 529 for their children.... they are not struggling by any means. It "smells" of middle class but in reality it has the luxuries and aura of a 3%er rather than a 1%er. I think I have a "similar" lifestyle in that I don't have many "luxury" items, but I truly want for nothing. That is NOT middle class. When I want to go do something, I just go do it and don't worry about where the money will come from. That is NOT middle class.
In terms of deductions: I don't claim standard because I have a large mortgage. HSA/FSA contributions, 5k (?) of childcare, 401k. My spouse has deferred compensation and also a 403B plus catch up because he's older than 55. We also have no state income tax so we are lucky there. I often wonder why I don't pay more in taxes, quite honestly.
I like how everything in the budget says X instead of Y where X is cheaper than Y. So let's play a game X instead of Z where Z is the frugal choice. Old Navy instead of Gucci. Yeah well. It could be Old Navy instead of Thrift Store. It could be Toyota Highlander instead of a bike and a bus pass. 1.8MM house instead of renting a 2 bedroom apartment.
The whole article reeks of privilege and lack of understanding how most people actually live.
Edit: And the idea that they won't have enough to retire at 60 is hogwash. Downsize, no children at home, no 529 to save for, no life insurance, no retirement savings...that's like 50% of their budget right there. Of COURSE they can retire at 60. So stupid.
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phil5185
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Post by phil5185 on Sept 16, 2019 15:45:14 GMT -5
“Unfortunately, despite making $350,000 a year, this couple will be unable to retire before 60 because they aren’t building an after-tax investment portfolio to generate passive income,” Dogen wrote.
Their budget doesn't seem out of line, I would probably appropriate a $350/year flow in a similar manner (altho I never had the occasion. ) But that doesn't mean that the goal of retiring at 60 with a 25X NW is out-of-reach. A 30-year-old couple, with 2 small kids, should be able to grow a $50k/yr investment flow ($38k 401k & $12k 529s) to about $11,000,000 in 30 years just by putting it into an 11%/year Index Fund - ie, no fancy investing needed).
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TheHaitian
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Post by TheHaitian on Sept 16, 2019 19:41:33 GMT -5
Edit: And the idea that they won't have enough to retire at 60 is hogwash. Downsize, no children at home, no 529 to save for, no life insurance, no retirement savings...that's like 50% of their budget right there. Of COURSE they can retire at 60. So stupid. I was scratching my head and thinking the same thing. They are maxing 2 retirement accounts at 38k/year and assume for the sake of argument they are 35. That is 25 years at ~10% and you have $4,434,750At 4% withdrawal $177,390/year. Like you said: no kids, no retirement savings, no 529, etc...that should be plenty!
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haapai
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Post by haapai on Sept 19, 2019 17:45:50 GMT -5
I know that the OP is a week old but I can't help but find myself circling back on this article. It's leaving a bad taste in my mouth and I'm pretty sure that it isn't just about envying folks who make five times as much as I do. There are other things wrong with the budget submitted.
First of all, it's old. I've seen these numbers before but I can't tell you when. It irks me no end that dates appear to have been scrubbed and the whole thing presented as new.
Second of all, I need some sort of explanation of how a family grossing $350K annually lands up in a $1.8 million dollar house. Is that normal in VHCOLA areas? That's over seven times annual gross income. How is this even possible? Let me give you a hint. Look at the current amount of mortgage interest being paid. Try dividing that number by any 1/12 of any of the annual lowest interest rates that you have ever heard of and look at the result. You'll instantly discover that this supposedly young family has a surprising amount of equity in their home. That instantly leads to the conclusion that this family either made a huge down payment (possibly from equity in a prior home) or is not nearly as young as is being implied.
Thirdly, I can't help but notice the absence of student loans and how only one partner is getting kudos for having paid them off at 30 and the amount mentioned is surprisingly small. The implication is that the other partner never had any student loans at all, which kinda raises my not-normal sense. I think that we should re-examine our presumptions of this couple having even roughly equal incomes, class backgrounds, or similar ages in light of this little tidbit.
Lastly, there's the damn round numbers. Okay, I get how a representative or anonymized budget might have to use round numbers but what I am seeing is insane. Why are so many of the monthly budget numbers multiples of $50 or $100? I'm kinda getting the sense that right after utilities were mentioned, numbers started to be pulled from the (n)ether.
I don't think that families living in VHCOL areas were served well by this whatchamacalit. I also think that folks living in places with much more moderate costs of living have just been handed a similar plate of hash.
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weltschmerz
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Post by weltschmerz on Sept 19, 2019 17:55:51 GMT -5
Agree. I don't see why they have to buy a crib every month Especially for a 2 and 4 year old. I really hate these high income "we can barely make it" budgets. They just piss me off more than anything. I know, eh? I was watching "Til Debt Do Us Part" and they showcased a couple making upwards of $300,000. Their stove died, and they were cooking on a small camp stove, because they just couldn't up with enough money to get another one. How is that even possible? I make about a tenth of that, and I can go out and buy a new stove tomorrow, cash.
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haapai
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Post by haapai on Sept 19, 2019 18:11:29 GMT -5
Especially for a 2 and 4 year old. I really hate these high income "we can barely make it" budgets. They just piss me off more than anything. I know, eh? I was watching "Til Debt Do Us Part" and they showcased a couple making upwards of $300,000. Their stove died, and they were cooking on a small camp stove, because they just couldn't up with enough money to get another one. How is that even possible? I make about a tenth of that, and I can go out and buy a new stove tomorrow, cash. I'd answer that really, really weird decisions happen when you either know that you are tapped out or do not know where you stand. I'd also like to put up for discussion the idea that if 90% of your take home pay is spoken for before you get it, cooking on a camp stove might just be the best thing that ever happened to you. Although cooking with charcoal or waste wood won't make much of a difference in your budget, it sure can wake you up.
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Tiny
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Post by Tiny on Sept 20, 2019 10:14:20 GMT -5
I know, eh? I was watching "Til Debt Do Us Part" and they showcased a couple making upwards of $300,000. Their stove died, and they were cooking on a small camp stove, because they just couldn't up with enough money to get another one. How is that even possible? I make about a tenth of that, and I can go out and buy a new stove tomorrow, cash. I'd answer that really, really weird decisions happen when you either know that you are tapped out or do not know where you stand. I'd also like to put up for discussion the idea that if 90% of your take home pay is spoken for before you get it, cooking on a camp stove might just be the best thing that ever happened to you. Although cooking with charcoal or waste wood won't make much of a difference in your budget, it sure can wake you up.
I'd modify that to "90% of your take home pay is allocated to bills you MUST pay". A long time ago, I believed I was living paycheck to paycheck and was a bit stressed by it. I felt that way because after the savings for long term, short term, and sinking funds and then all my regularly scheduled expenses I had very little "disposable" money... mind you I was still going on vacations, buying season tickets, repairing my car as needed, etc due to the short term and sinking fund savings. So, yes, 90% or more of my take home pay was spoken for... but I could still have paid cash for a new stove or weathered a 3 months of unemployment for example. I think it's WHAT your take home pay is spoken for - that's important. in other words when your take home pay is used mostly to pay for stuff you've already bought/used and/or something you MUST use on a monthly basis (shelter, utilities, food, gas) that it gets hairy.
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hoops902
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Post by hoops902 on Sept 20, 2019 10:45:12 GMT -5
I'd answer that really, really weird decisions happen when you either know that you are tapped out or do not know where you stand. I'd also like to put up for discussion the idea that if 90% of your take home pay is spoken for before you get it, cooking on a camp stove might just be the best thing that ever happened to you. Although cooking with charcoal or waste wood won't make much of a difference in your budget, it sure can wake you up.
I'd modify that to "90% of your take home pay is allocated to bills you MUST pay". A long time ago, I believed I was living paycheck to paycheck and was a bit stressed by it. I felt that way because after the savings for long term, short term, and sinking funds and then all my regularly scheduled expenses I had very little "disposable" money... mind you I was still going on vacations, buying season tickets, repairing my car as needed, etc due to the short term and sinking fund savings. So, yes, 90% or more of my take home pay was spoken for... but I could still have paid cash for a new stove or weathered a 3 months of unemployment for example. I think it's WHAT your take home pay is spoken for - that's important. in other words when your take home pay is used mostly to pay for stuff you've already bought/used and/or something you MUST use on a monthly basis (shelter, utilities, food, gas) that it gets hairy. And I think that's actually exactly what's happening in the article. They're saving a TON of money, and then it is presented as "middle class" "not much left over". I think this way of thinking is actually simply causing a lot more people to think of, and present themselves as, unable to save or spend freely when in reality they absolutely could. 90%+ of your take home pay SHOULD be spoken for...that's simply good budgeting. You're absolutely right in that it matters WHAT that 90% is going toward. There's a big difference between having 90% allocated as 85% fixed expenses and consumables and 5% savings/investing...and 45% fixed expenses and consumable and 45% savings/investing. Both still have 90% spoken for in the budget, but it's not the same flexibility, nor is it remotely similar in terms of whether you're ACTUALLY living paycheck to paycheck.
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